Customs, Excise and Gold Tribunal - Bangalore
Gtn Textiles Ltd. vs Commissioner Of Central Excise on 9 May, 2005
Equivalent citations: 2005(189)ELT296(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from O-I-O No. 11/2004, dated 24-8-2004. The appellants are manufacturers of processed Cotton Yarn falling under Chapter sub-heading 5205.19 of CET. The department investigated the matter and found that the appellants were clearing processed cotton yarn without payment of duty and alleged that it was in contravention of the provisions of Rule 96E of Central Excise Rules and after investigation, they were charged that they have cleared 323487.60 kgs. of processed cotton yarn without payment of duty under the said Rule during the period October, 1998 to November, 2000 to their subsidiary units viz. GEETTEAN, M/s. GTN Textiles Ltd., Doubling unit and M/s. GTN Textiles Ltd., Medak Unit and other domestic units. The processed cotton yarn was sent to M/s. GEETTEAN, Doubling unit, Medak unit for the purpose of Knitting, Twisting and Rewinding respectively. The appellant filed their reply to the Show Cause Notice and contended as follows which is recorded in Para 12 of the impugned and the same is extracted herein below:
12. Assessees have furnished reply to the Show Cause Notice vide their letters dated 24-12-2003 and 22-7-2004. Sri A.V. Raghava Rao, Assistant General Manager and Sri M. Satyanarayana, General Manager (Finance) have appeared for a personal hearing on 12-7-2004. The submissions made vide their replies and during the Personal Hearing are as follows :
(i) They removed cotton yarn from their Yarn Processing Unit (YPU) Gundlapotlapally, Mahaboobnagar (Dist.,) to M/s. Geettean Viniyog Ltd., GTN Doubling Unit & GTN Medak Unit, under Rule 96E. All the removals were made under AR-3As by following the procedure under Rule 156A, 156B as modified by Rule 173N of C.E. Rules, 1944. The copies of AR-3As were submitted to jurisdictional Range office, and the details were reflected in Monthly returns. The recipient units have filed D-3 intimations with jurisdictional Range Offices and there is no suppression or mis-statement on their part, and extended period cannot be invocable under proviso to Section 11A(1) of Central Excise Act, 1944. Their factory records were inspected by the Officers at various levels including internal Audit and AG Audit,
(ii) They submitted that,
(a) In M/s. Geettean Vinyog Ltd., Cotton Yarn is made into fabric by knitting and out of 1,81,141.34 kgs SENT (I) 1,71,877 kgs was exported (ii) a small qty fabric was sold locally and duty on yarn content of 9202 kgs in the fabric was paid as the fabric was exempted & (iii) a negligible quantity of 62.34 kgs is not reconciled, and necessary copies of export documents were submitted along with their reply dated 24-1-2003.
(b) With reference to Doubling unit, the total qty of 1,23,680.74 kgs was received back after processing and the same were shown in their monthly returns.
(c) With reference to Medak Unit and others, out of a qty of 18665.52 Kgs sent, 6309.66 kg was cleared locally after processing on payment of duty, or for export and a qty of 7879 kgs was received back. Out of the balance qty of 4480.44 kgs, 957.80 kg was exported 44 kg was sold as waste and samples, incurred process loss of 79.46 kg, and received back 3399 kg from their Nagpur factory under AR 3A No. 006/2000 and Invoice No. L53, dated 26-4-2000.
The detail of reconciliation of quantities sent to the other units, furnished by the assessee is as under :
Unit Qty recd Process Dispatch of qty after processing for
u/r ing (in kgs)
96E(Kg) done/have Export Do- Re Total Bal
provision mestic ceived qty. ance
of clear- back qty.
ance
Geet- 181141.34 Knitting 1,71,877 9202 Nil 1,81,079 62.34
tean
Dou- 1,23,680 Twisting Nil Nil 1,23,680 1,23,680 Nil
bling single
Unit yarn into
double
Med- 15266.52 Spinning/ 957.80 6309.66 7879 15190.46 79.46
ak re- + 44 proc-
Unit winding (w&s) ess
loss
Nag- 3399 Nil 3399 3399 Nil
pur
unit
(iii) They accepted that at Geettean Vinyog Ltd. only knitting is under taken and though the procedure followed by them was admittedly not in strict conformity with the provisions of Rule 96E, the total processed qty was duly accounted for and there is only a procedural lapse. Most of the yarn received at GEETTEAN was used in the manufacture of knitted fabric which was exported and in any case, the facility for receiving yarn without payment of duty was available under Rule 13(1)(b) of Central Excise Rules, 1944. Moreover the Cotton Yarn removed from their factory was not diverted to any other place, nor removed clandestinely without payment of duty, as such there is no loss of revenue to the department.
Regarding other clearances, they were as per Rule 96E as cotton yarn is otherwise manufactured at their Doubling and Winding units.
(iv) The Party also has submitted that the procedures followed by them under Rules 156A, 156B & 173N of C.E Rules, 1944 were within the knowledge of the department and requested not to invoke penal provisions under Section 11 AC or under 173Q of C.E. Rules.
2. The Commissioner considered the question as to whether the unit engaged in the clearance of processed cotton yarn manufactured under Rule 96E of C.E. Rules and the units engaged in the processing of such yarn received qualify as "factory" for the purpose of availing the benefit of duty exemption or otherwise. After quoting Rule 96E, he has held that the other two units to whom the cotton yarn was supplied do not qualify as a "factory" under Rule 96E(2) and, therefore, the demands are required to be confirmed.
3. The assessee had also submitted that out of the total quantity of 1,81,141.34 kgs. of cotton yarn sent to M/s. GEETTEAN, "Knitted fabric" made out of cotton yarn of 1,71,877 kg. was exported, 9202 kg. was cleared to the domestic market on payment of appropriate duty and a minor quantity of cotton yarn of 62.34 kg. was not reconciled and the finished goods are cleared from GEETTEAN on payment of applicable duties and as such there is no loss of Revenue to the Government. The Commissioner has not agreed with their contention and has confirmed the duty as demanded holding that there is a clear contravention of Rule 96E and has also invoked penal provision under Section 11 AC of the Act.
4. We have heard both sides in the matter.
5. The learned Counsel contended that all the units are of the same manufacturer and Rule 96E permits removal of cotton yarn without payment of duty from one factory to another factory for the purpose of processing or packing or for the purpose of manufacture of cotton fabrics or jute fabrics. He contends that in terms of Rule 96E, all the factories belong to the same manufacturer and clearance of the cotton yarn from one factory to another of the same manufacturer will not attract duty. He submits that the duty cannot be confirmed when the goods have been exported and also that when the same has been cleared for domestic units on payment of duty. With regard to the non-confirmation of demands on export, the Counsel has relied on the judgment of Kansal Knitwears v. CCE, Chandigarh - 2001 (136) E.L.T. 467 (Tri. - Del.) wherein it has been held that goods manufactured in one unit of assessee used captively for manufacture of export goods does not attract duty in terms of Board's Circular No. 15/89, dated 6-3-1989 and 105/16/95-CX., dated 2-3-1995 in terms of Rules 12 and 13 of C.E. Rules. He also relied on the judgment of the Apex Court in the case of Thermax Private Ltd. v. CC - wherein also it has been held that the benefit of Rule 192 of C.E. Rules is available to manufacturers as well as importers once the stipulated nature and use of the goods are satisfied and the user holding an L-6 Licence/C.T. 2 Certificate. He also relied on the judgment of the Tribunal rendered in the case of Gangotri Textiles Ltd. v. CCE, Pune - 2005 (179) E.L.T. 580 (Tri. - Mumbai) wherein the benefit of Rule 96E has been granted when the yarn has been removed for conversion into hank yarn to another unit. The findings recorded in Para 4 is reproduced herein below :
"4. There is no explicit provision in Rule 96E that the yarn removed for conversion into hank yarn should be brought back to the factory. Be that as it may, it is an admitted fact that hank yarn is exempt from payment of duty under Notification 6/2000, dated 1-3-2000. In such circumstances, the fact that the hank yarn has not been brought back as per the provisions of various rules cited above does not mean that an exempted goods can be subject to payment of duty. The entire contention of the department appears to be that because the alleged procedure laid down in Rule 96E is not followed, duty becomes payable on exempted goods. Such a contention cannot be accepted. It is perhaps possible to impose a penalty for violation of the rules when a manufacturer does not conform to the provisions of any particular rule. But in this case, the appellants have informed the department and taken its permission for removal of hank yarn to their depots. In such an event, penalty also cannot he imposed because whatever has been done with the approval of the department."
He further relied on the ruling of the judgment rendered in the case of ITW Signode (India) Ltd. v. CCE, Hyderabad by Final Order Nos. 1451 to 1453/2002, dated 13-11-2002 wherein this Bench, on similar facts and circumstances, has held that the demands would be barred by time when the goods are cleared from one unit to another unit of the same assessee and all the details have been declared. He also relied on the judgment rendered in the case of Sri Venkatesa Mills Ltd. v. CCE, Coimbatore - (Tribunal) wherein permission was granted to transfer cotton yarn to five units for conversion into hanks in terms of Rule 96E and demands raised for larger period was set aside. It is his contention that 95% of the knitted fabric made from the cotton yarn was exported on payment of duty by the appellants from the premises of GVL and the rest of the knitted fabric was sold in the domestic market on payment of duty. He submitted that the clearances were made during the period 1998-1999, 1999-2000 to 2000-2001. The investigation was done in November, 2000 and the Show Cause Notice was issued on 30-10-2003. The facts were all known to the department and, therefore, the issue of Show Cause Notice after a long period of time is not enforceable on account of time bar. He pointed out that the cotton yarn were removed in terms of Rule 96E of AR-3As and M/s. GEETTEAN Viniyog Ltd. in turn receiving the re-warehousing certificates after counter signature of the Officer-in-charge of M/s. GEETTEAN Viniyog Ltd. They were filing monthly returns declaring the quantity of cotton yarn removed without payment of duty under Rule 96E and the department were aware of all these facts. He relied on the judgment rendered by the Apex Court in the cases of (a) CCE v. Chemphar Drugs & Liniments - ; Padmini Products v. CCE - ; Pushpam Pharmaceutical Company v. CCE -. He also submitted that no penalty is imposable under Section 11 AC of the Act.
6. The learned SDR reiterated the findings recorded by the Commissioner.
7. On a careful consideration, we notice that the cotton yarn may be removed without payment of duty from one factory to another for the purpose of processing or packing or for the manufacture of cotton fabrics in terms of Rule 96E of C.E. Rules. The Commissioner has not accepted the removal from the appellants factory to their own units as exempted from payment of duty in terms of Rule 96E. After due consideration, we are of the considered opinion that all the units belong to the same manufacturer and such removals under Rule 96E does not require payment of duty. The appellants had been filing declarations and had been following AR-3As procedure. 95% of the goods are also exported. Therefore, in terms of the citations relied and quoted supra, the question of demanding duty in respect of goods, which are exported, does not arise and moreover the goods which are removed to domestic units have been cleared on payment of duty. It is further seen that the appellants have been informing the department by filing AR-3As and invoice-cum-delivery challans for each removal of cotton yarns under Rule 96E and it has been countersigned by the Officer-in-charge of M/s. GEETTEAN Viniyog Ltd. for re-warehousing of cotton yarn at the consignee's factory. The appellants have also been regularly filing their monthly returns with the Department in which they have clearly indicated the quantity of cotton yarn removed without payment of duty under Rule 96E. The periods involved are from 1998 to 2000. The Department investigated in November, 2000 but took their own time to issue the Show Cause Notice on 30-10-2003 i.e. after almost 3 years from the clearance. Therefore, in terms of the judgment cited and quoted supra, the demands are clearly time barred. The penalty is also not imposable in the facts and circumstances of the case. In that view of the matter, the demands are not sustainable and the same are set aside by allowing the appeal with consequential relief, if any.
(Operative portion of this Order was pronounced in open Court on conclusion of hearing)